Colin Brown explains how to retain key employees and reduce turnover

May 29, 2007

If you are looking to reduce employee turnover, this extended article shows you how to proceed. The individual steps are designed so you can tailor them to your precise situation; deploying only those retention measures that will be cost effective.

Reducing Employee Turnover

These are the steps, each of which is explained in brief below, and in more detail on its own separate page.

Estimating the cost of employee turnover

Analysing recent departures

Determining your targets

Diagnosing the causes

Employee value propositions

Best practices elsewhere

Selecting appropriate retention measures

To reduce employee turnover you should seek to solve those problems that have been causing previous departures and look to improve your employee value proposition.

The key to reducing employee turnover is make sure your retention measures are highly targeted.

Estimating the cost of employee turnover

The first step is to estimate the cost of employee turnover. This should be done for the different groups of employees; for example administrative, technical, managers etc.

In most circumstances a good starting point is to use the available research based figures. These are broad estimates but serve the purpose, which is to give you a sense of the scale of the problem, and assist you in determining retention priorities later on.

Where the cost of turnover is minimal, you should not be investing large amounts to reduce turnover. Conversely, where the cost is significant, it may be appropriate to invest more in retention interventions.

Analysing recent departures

The next step is to examine all available data regarding recent employee turnover. Pay careful attention to your definition of turnover.

Look for exit points, trends, areas of high and low turnover. Breakdown the information into its component parts. Compare your figures against appropriate benchmarks.

Analysis will help you to discover particular troublespots in need of attention. As a rule highly targeted retention interventions are more effective than broader measures

Determining your targets

The previous two steps will have generated some useful information to assist you in determining where to focus your attentions.

In addition you may wish to consider specific individuals or groups of individuals that have not been experiencing high levels of turnover to date, but are high risk either due to the cost of turnover, or due to the likelihood of them leaving.

Think carefully about which employees you really need to keep hold of.

Diagnosing The Causes

Once you have determined which categories to target, the next step is to diagnose the causes of turnover for each of these categories.

Make use of both qualitative and quantitative approaches to get the most accurate diagnosis.

Beware of exit interview data. Research to date suggests it should be viewed with extreme caution.

Employee value propositions

Without a strong employee value proposition you run the risk of continuing to lose employees, just for different reasons.

Compare your employee value proposition against those of your competitors, then conduct internal market research to gain a deeper understanding of your employees' needs, aspirations and preferences.

Look to see where you can increase value for employees at minimal cost to the company.

Best practices elsewhere

Retention focused recruitment

Retention focused orientation

Retention focused recognition

Retention focused managing

Retention focused career support

Selecting appropriate retention measures

There is a wide range of interventions to choose from, but make sure you select appropriate ones. Be careful to assess the return on investment before deciding which interventions to execute.

Finally, execute your strategy. Get feedback and adjust where necessary. Determine the real return on investment for the project and communicate the results to interested parties.

Job sculpting is a simple concept that takes a fair amount of thought to put into practice. For some companies it is relatively easy to do, while for others it would involve so much work that it is barely worth considering. It tends to be the smaller or medium sized firms that have sufficient flexibility to benefit from sculpting jobs to fit individuals.

This short Guide on Job Sculpting sets out some ideas as to how you can boost retention by making small changes that have a big impact upon employees.

The key to improving employee retention is to understand your employees better.

Just as the firm that possesses a more detailed knowledge of its customers, is in a stronger position to successfully tailor its offering to meet their specific needs, the firm that understands its employees' preferences, will have the edge over its competitors when it comes to employee retention.

So the key lies in the detail: knowing why they joined, what might cause them to leave, what they value, their preferences, their aspirations, what they enjoy most at work.

Employee Retention

The days of significant loyalty towards an employer appear to be over.

To retain employees the firm needs to make sure its offering is preferable to that of competitors for their services.

Academic researchers detail employee needs in three key areas:

everyday experience (working relationships)

psychological growth (personal development)

transactional relationship (salary and benefits)

Firms should make sure they pay attention to each of these areas when looking to improve employee retention. Successfully meeting employee needs in two of the three categories is unlikely to be sufficient.

Get Curious

The first step towards improving employee retention is to get curious; to be interested in your employees, to ask questions, to gain a more detailed understanding of their requirements.

What are their aspirations for the future? Their current needs? Their preferences?

What do they enjoy about work? Why did they join? What are their favourite aspects of the job?

Why do people leave the firm? What might cause them to leave? What could the firm do to improve employee retention?

Ask recent departees why they left? Where they went next? What it would have taken for them to stay?

Make use of interviews, focus groups, and surveys to get the level of detail you need.

Analysis

Once you are in possession of sufficient information, the analysis stage can proceed.

Breakdown the information to provide greater insight. Look at turnover rates for individual units, departures within the first six months, duration of employment, exit points, destinations. Compare figures. Make note of both extremes; high and low.

Segment your employees into appropriate groups. What are their common needs? Their aspirations?

Some key drivers of employee turnover will emerge naturally. Others may lie below the surface.

Troublespots

A significant part of improving employee retention is tackling troublespots; problems that have caused employees to leave.

Failing to eliminate these problems is likely to result in a continual stream of employees departing.

A pattern of early departures suggests faults in the recruitment process or problems with orientation. Significant departures from one department will tend to be the result of managerial deficiencies.

Improve The Total Reward

The next stage after the elimination of major problems is to find ways to improve the total reward on offer to employees.

Employees tend to be conscious of the market rate for the job and will be tempted to move if higher wages are available elsewhere.

The information you obtained detailing employee preferences should provide clues to a winning employee value proposition. Remember employees value a wide range of aspects of work, not just the financial reward.

Are they after a better work life balance? More fun at work? Professional development?

If there are only limited funds available for salary increases, look to improve the total reward on offer through other means. Improve the everyday experience. Do more to recognise the efforts of your employees. Award prizes for special contributions.

Communication Channels

In the medium term, the key to improving employee retention is to make sure your communication channels work.

Firms that listen to employees, will be in position to act when necessary. Even in the best firms problems arise that might cause valuable employees to leave.

You want to know if your employees are unhappy, are thinking of leaving, if your competitors have become an attractive option.

As well as an open door policy, take a proactive approach to communication, keep asking questions: What do you want to do next? What skills do you possess that you aren't currently making use of?

Flexibility/Choice

A sensible approach for improving employee retention is to offer a wider choice in as many different areas as possible.

Firms that provide choice can accomodate the needs of employees better. Choice in the hours worked, choice in terms of location, choice in the job projects undertaken.

Where possible look to extend the lattitude of discretion.

Offer work-life balance options that allow employees to meet their needs as parents. Provide sufficient leeway that they can remain with the company as their life changes.

Career Growth

Recent studies show career growth to be one of the key drivers of employee turnover.

Taking steps that enable employees to progress their career with the firm will often improve employee retention.

Some employees will be looking for additional responsibility; perhaps experience in managing people or responsibility for a special project.

Provide opportunities for employees to acquire valuable skills that will benefit their career. Inhouse or external training . Help with gaining qualifications. Get experienced employees and managers to coach more junior employees.

Managers

Studies show that many employees leave due to their manager or supervisor.

The relationship between manager and employee is often the single most important factor in determining the everyday experience for a given employee.

Some managers are encouraging, caring, understanding, inspirational. They go out of their way to coach their employees, to act as a catalyst for personal and professional development, to let them grow; focusing on strengths rather than weaknesses.

They understand the importance of praise, recognition, appreciation, thanks for a special effort. They make the firm a great place to work.

They take an interest in their employees as people with lives beyond the workplace. They create an emotional bond that makes leaving more difficult.

Turning your supervisors into amazing people managers can really make a difference when you're looking to improve employee retention.

Be Competitive

Take notice of what the competition is doing. How does your employee value proposition compare? How do you compare with the market rates for various jobs in your firm?

Your competitors for the services of your employees, may include firms that are not direct competitors. Employees may be attractive to a range of firms in different sectors.

Improving Employee Retention: Conclusions

Improving employee retention requires a willingness to ask questions, to discover employee preferences, to recognise the existence of competitors.

A winning employee value proposition is tailored to the specific needs of employees, taking on board their preferences.

The heart of employee retention is providing more value to employees than they could get from joining another firm.

A firm that offers choice to its employees, that is flexible rather than rigid, stands a far better chance of retaining its employees.

If you want to reduce employee turnover, especially departures in the first six months, then take another look at your recruitment process. I've created a short guide on retention focused recruitment for you to download and read.

Author Roger Herman has produced a book teeming with strategies for keeping good people, 125 in all.

These strategies come under 5 broad headings:

Environmental

Relationship

Task-Focused

Compensation

People Growing

The main difficulty I have with this book is the sheer number of strategies. The good ones are to some extent hidden amongst the sensible, but hardly likely to make much of an impact, strategies such as Strategy number 6.10: Eschew profanity.

Too many of the strategies are along a similar theme if not actual duplications of one another.

Written back in 1991, the book is targeted more towards large organisations and at times its message doesn`t appear to fit with some of the changes that have happened in the last 16 years.